About Author

“The central irony of financial crisis is while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending.”

Larry Summers October 23, 2011

http://www.zerohedge.com/contributed/larry-summers-blows-it-tv In this video Larry Summers says people are working a longer week. I have seen where schools are talking about shortening the week by 1 or 2 days to help with thier financial situation. This will give LESS education to our kids, that can’t be good long term. However Larry Summers has to be one of the most global visionary economists that America has: http://www.whirledbank.org/ourwords/summers.html In this document he was talking about global solutions to pollution markets, far ahead of warren or anyone else even thinking about the idea, and do not forget that Summers was INSTRUMENTAL in holding back the winklevoss twins at Harvard while Zuckerman went forward with facebook.

Ya, and if you read Warren’s book you’d know that when Warren asked him, “Larry what’s wrong with the budget deficit?” Summers replied: “it takes away savings that could be used for investment.” Warren said: “No it doesn’t, all Treasury securities do is offset operating factors at the Fed. It has nothing to do with savings and investment.” To which Summers retorted: “Well, I really don’t understand reserve accounting, so I can’t discuss it at that level.” Senator Daschle was looking on in disbelief.”

Summers also ganged up on Brooksely Borne with Greenspan and Geithner to stifle her when she proved that the whole derivative scam would come crashing down. He was instrumental in running her out of government. That was in 1998-99.

Summers may be considered brilliant, but in the real world of what works for public purpose he’s an arrogant, power hungry, and unpleasant demogogue. Nothing he’s ever done in public service has been for the people nor has had any remarkable accomplishments.

@Robert Bostick, Hero or not, his statement back in October seems to be right in the MMT bowling alley, shouldn’t we encourage that? Why tear down one of the few people at the top who may fully endorse moslers proposals?

Stop going for the easy buck and start producing something with your life. Create, instead of living off the buying and selling of others.
-Martin Sheen as Carl Fox, Wall Street, 1987

“In the 1970s, 3 percent of retiring members [of Congress] became lobbyists…Between 1998 and 2004, more than 50 percent of senators and 42 percent of House members made that transition. As of June 2010, 172 former members of Congress were registered lobbyists. In 2009 the financial sector alone had 70 former members of Congress lobbying on its behalf.” —
“Republic, Lost” Lawrence Lessig

Calculated risk argues that the participation rate did not fall by that amount, rather is is due to….

“With the 2010 population controls, the “not in labor force” appeared to have increased by 1.2 million in January, and the working age population jumped 1.7 million. That didn’t happen last month; the numbers changed because of the new population estimate. This does suggests there are 1.2 million more people out of the labor force than we originally thought, but that is because the working age population is larger than previously estimated.

As the BLS points out, without the population change the “not in labor force” actually declined.

A couple other key points:
1) The decline in the participation rate was entirely due to the population change.
2) The employment-population ration would have increased 0.3 (good news) without the population change.
“.

But the population estimate DID change, being upwardly revised which surely puts something of a dampener on the jobs figure, better though they seem.

Someone finally went after Ron Paul and the libertarian clowns. Well some of them may be actually not funny clowns but Neo-Nazi.

“The nationalist American Third Position Party (A3P) pursued a “bridging tactic” with the Ron Paul Revolution movement that support the Republican candidate for the White House, according to emails hacked by Anonymous.”

If you are looking for signs of an improving economy, the participation rate is only of secondary concern.

The participation rate can be driven down by people retiring, moving back to Mexico, going Galt, or what have you. And it can also go down with an increase in population.

Those are social and political issues, and may very well be important in that context.

But if jobs are actually increasing, that is a very good thing no matter how you look at it. And because of the above mentioned factors, the number of people working can actually increase at the same time the participation rate (and unemployment rate), go in the wrong direction.

@jaymaster, Jaymaster, one of my laid off silicon valley friends sent me here http://www.gamespot.com/pc/index.html and said he gets jobs all the time, an orc gives him a job to slay a dragon, or obi won kenobi gives him a job to find the sith lord. I said you are nutzo, that is just as bad as showing up at warren mosler’s economics board and posting for free, you aint getting paid for all that time you spend, he said au contrare, some of these games do pay you for showing up and playing and completing tasks. Warren’s board is behind the times. I know granniez that get paid to play online bingo or scrabble if they watch ads, its all so silly. 2 billion to 20 billion in a little over 10 years, that is growth you can believe in… He said thier online economies work a lot like MMT, with the flick of a keystroke you just mark up the gold coins in your dungeon knapsack from out of thin air ;)

@jaymaster, If there were plenty of jobs, if the economy were vibrant the participation rate would be going the other way. So we are losing productive output everyday. Maybe not by half, as Warren noted, but a lot. That is the pity of not doing all we can to put people to work. I think Bill Mitchell calulated the loss conservatively at 9.7 billion every day.

@Hepionkeppi, There’s also the underground economy. Nobody wants to know how big it is. It’s also known as the “cash economy.” When I hire seven people to help up-grade a rental house, I’d bet that only one of them reported the cash to the IRS.

Seems that if we don’t make the products/services obsolete fast enough, we make our descendants obsolete. Decisions, decisions.

“To hibernate, die, or innovate .. yea, those are the questions.
Whether ’tis nobler in the aggregate to suffer,
The slings and arrows of outrageous output gaps
Or to take fiscal arms against a sea of DTs,
and by opposing, imMERS them?”

Where’s Shakesdrear when we no longer need him? Underemployed? Paying off his student loans? Or in some Austerity Gulag in eastern Europe? Only your drone operator knows.

Hey I just googled the paper, he sounds like Warren from 1932, the more things change, the more they stay the same, one of the paragraphs from the above paper:

However, modern technology and the whole adventure of applying creative science to
business have so tremendously increased the productivity of our factories and our fields that
the essential economic problem has become one of organizing buyers rather than of
stimulating producers. The essential and bitter irony of the present depression lies in the
fact that millions of persons are deprived of a satisfactory standard of living at a time when
the granaries and warehouses of the world are overstuffed with surplus supplies, which have
so broken the price level as to make new production unattractive and unprofitable.

Primarily, this country and other countries are suffering from disturbed human relationships.

Factories, warehouses, and fields are still intact and are ready to produce in unlimited
quantities, but the urge to go ahead has been paralyzed by a decline in buying power. The
existing troubles are man-made, and the remedies must be man-conceived and man-executed.

In the present inadequate economic organization of society, far too much is staked on the
unpredictable whims and caprices of the consumer. Changing habits of consumption have
destroyed property values and opportunities for employment. The welfare of society has
been left to pure chance and accident.

More fascinating insight from Bernard in 1932, he sounds just like Warren Mosler today:

In a word, people generally, in a frightened and hysterical mood, are using everything that
they own longer than was their custom before the depression. In the earlier period of
prosperity, the American people did not wait until the last possible bit of use had been
extracted from every commodity. They replaced old articles with new for reasons of fashion and up-to-dateness. They gave up old homes and old automobiles long before they were
worn out, merely because they were obsolete. All business, transportation, and labor had
adjusted themselves to the prevailing habits of the American people. Perhaps, prior to the
panic, people were too extravagant; if so, they have now gone to the other extreme and
have become retrenchment-mad.

People everywhere are today disobeying the law of obsolescence. They are using their old
cars, their old tires, their old radios and their old clothing much longer than statisticians had
expected on the basis of earlier experience.

The question before the American people is whether they want to risk their future on such
continued planless, haphazard, fickle attitudes of owners of ships and shoes and sealing wax.

What the people can afford is very different at a time when the majority are gainfully
employed than it is in a period when perhaps ten million are without gainful employment.
The job of modern management is to balance production with consumption – to enable one
large group, like the factory workers in the cities, to exchange the products of their hours of
labor for the output of farmers. The prevailing defeatist assumption that depression and
unemployment must continue because we have too much of everything, is the counsel of
despair.

Society is suffering untold loss in foregoing the workpower of ten million human beings. The
present deadlock is the inevitable result of traveling along blind alleys. Chaos must
unavoidably flow from an unplanned economic existence.

Warren, be honest, you stole some text from this guy, he sounds just like YOU but from 1932.

From the orthodox Marxist point of view what poses a much more serious problem than glut of durable consumer goods is the excess of capital goods which have to be destroyed in order to reboot the system and restore the rate of profit.

In my opinion houses should be treated as durable consumer goods rather than capital goods.

If the destruction of the capital goods doesn’t take place the capitalist will not invest. It is not only the short-term issue of consumer goods depreciation but also a medium-term issue of capital goods.

Disclaimer:
I haven’t finished reading and I do not blindly believe in this “stuff” but it is definitely worth studying and adds another dimension to our understanding of the economic processes. This may also explain the reluctance of the financial capitalist plutocracy to stimulate the economy. I don’t believe that Bernanke & Co don’t know that they can keep creating money in the current environment. They can but they don’t want to.

There is one element in Marxist theory of value which still doesn’t convince me but that particular point does not invalidate the main claim – the falling tendency of the rate of profit. According to Kliman this process itself will NOT lead to the destruction of global capitalism as a dominant system (because it will reboot itself) but if we look at the effects of globalisation the leadership of one large country which is very familiar with Marxism is taking advantage of it.

Now I hear china is building a new detroit EVERY month, but why shoot thier foot off like this, all the foriegn investors that want a piece of the pie and that will help keep their construction workers employed, they want to limit the growth of hot money? Chuck Schumer is talking about giving citizenship to any foreigner that comes over to the USA and buys a house or invests 250K or more, and china pulls this stunt! WHere is the foreign capital going to flow?

Adam (ak) Reply:February 3rd, 2012 at 5:41 pm

Save America,

The issue is far more complex I believe. The Chinese are at a completely different stage of development and their system is not financial capitalism but a kind of state capitalism ruled by a tight-knit political oligarchy.

They will hit the same wall the Japanese and Koreans hit but not too soon and they are perfectly aware of the challenge. You can read about the unsustainability of the current development model in the long run and the need for a change in every major speech made by the leaders.

Now what is the “foreign capital” which may get crowded out? The money created when Goldman Sacks appears to be a bank and expands its balance sheet using obscure tricks only to invest what it has lent to itself when it morphs into an investment fund? They don’t need this kind of “capital” in China. They have skilled programmers and they can alter a balance sheet on their own. The difference is that the Communist Party at least tries to supervise the process of hacking balance sheets there.

My understanding of marxist notion of tendency of the rate of profit to fall is that it just makes basic error of confusing stocks with flows.

Adam (ak) Reply:February 5th, 2012 at 6:16 am

Hepionkeppi,

There may be a falling rate of profits and the intuitive understanding of the processes may be correct but the Marxist theory does not convince me at all.

I think that there is an error in labour theory of value but it is not stock-flow confusion but rather the fact that the set of equations used to first calculate the “values” of the products and then prices is overdetermined. (the “transformation problem”). If I understand this correctly the problem can be reduced to elementary linear algebra – as shown by Steedman.

I think that there is no such thing as a “value” either in the Marxist sense (“labour-value”) or neoclassical sense (“utility-value”). Regarding the utility value the critique is more complex but nevertheless possible, we need to establish that humans are not rational in the sense used in economics – that their actions are not predetermined (even in the bounded-rationality sense). The experiments mentioned by Dan Ariely and other behavioural economists (who more correctly can be qualified as psychologists) clearly show that human behaviour changes over time as a result of the interactions with other humans and personal experience. What makes us human is that we are not deterministic even in the probabilistic sense. We are even sometimes creative. No single piece of silicon has ever been made to invent anything and as long as we do not replicate the essence of how neural networks work (distributed analogue processing) or invent something similar, Artificial Intelligence will be as useful to science as an inflatable sex toy for someone looking for a life partner.

The only numerical parameters (“measures of value”) we have are “exchange values” expressed in monetary units at certain point of time and on certain markets. To me Marxists, Neoclassicals of every variety, Neo-Keynesians and Austrians are the same – they want to philosophise and derive the statements about the facts from the incomplete and unrealistic set of axioms and assumptions rather than describe facts. If the facts do not fit into the neat theory they ALL just ignore the facts. They are paid to do so but still some have been brainwashed enough to act in a good faith.

Otherwise how can we explain that the market valuation of Facebook is supposedly $100bln? For that amount of money I would be able to hire 1000000 programmers for a year. What is the unique utility value they (and nobody else) can create?

Yet the “value” of Facebook may be much less in a few years time if this is a bubble and the bubble bursts. Who knows?

SteveK9 Reply:February 3rd, 2012 at 5:29 pm

@Save America, Replying to yourself is certainly an odd form of conversation.

An engineer at a silicon valley firm sent me this video about “planned obsolesence” yesterday, he said it was all true, to keep growth plugging along he cannot design for resilience , why are engineers believing this propoganda?

http://www.youtube.com/watch?v=0bxzU1HFC7Q Anyways the video talks about Bernard London during the 1929 depression having the government force “planned obsolesence” on all products so that they would expire and thus LABOR would have to be hired to build new stuff as a way to fight unemployment. The government was to destroy all products after the expiration date. So if I bought a Mosler MT900 car and it was only certified for 5 years of use, after 5 years it would be destroyed by the government and someone could work and build me a new one. Or maybe I had a double hulled super yacht that only had a 1 year expiration date, just think of the JOBS we could produce with this plan, wow those guys like eccles and Bernard London had some vision back in the day didn’t they?

Have you considered this option Warren? Forcing “planned obsolescense” on the citizens so that we can help the unemployment situation? It is a novel idea for helping our masses of unemployed no?

@Save America, Dave BEgotka, you could get behind this “planned obsolesence” couldn’t you? If all of warren’s cars and other products had to be destroyed by the government on a set expiration date, you Begotka, might could get rehired to make all those products you used to make for Warren, you would like a job working again for warren, wouldn’t you dave? dave? ;)

@Save America, Well, the irony is that between goods and services, it is the market for service, especially high quality service, that is never “satisfied.” Of course, when industrialization took off as a male enterprise (the first spinning mills in Massachusetts were staffed by young women, the daughters of farmers who had no prospect of inheriting), “services” were largely provided by unpaid or lowly paid labor. Economists wrote about “work” moving out of the house when men went to the factories and overlooked the productivity of the home.
Even today, economists are convinced that “economic development” is concerned only with those activities which involve monetary transactions. So, getting people “hooked” on money is a major enterprise. Otherwise, how can accountants know what’s going on? It’s as if all enterprise were dedicated towards satisfying the measuring stick.

The Edison Museum in Fort Meyers has a light bulb that’s been burning since Edison’s day. They say the filament is made of a palm strand.

The designation “consumer society” is really insulting. Not only did consumption use to be a medical disability, but buyers/users never had a choice, other than send the junk to the dump.

A month ago, we joked when we said that for Obama to get the unemployment rate to negative by election time, all he has to do is to crush the labor force participation rate to about 55%. Looks like the good folks at the BLS heard us: it appears that the people not in the labor force exploded by an unprecedented record 1.2 million. No, that’s not a typo: 1.2 million people dropped out of the labor force in one month! So as the labor force increased from 153.9 million to 154.4 million, the non institutional population increased by 242.3 million meaning, those not in the labor force surged from 86.7 million to 87.9 million. Which means that the civilian labor force tumbled to a fresh 30 year low of 63.7% as the BLS is seriously planning on eliminating nearly half of the available labor pool from the unemployment calculation. As for the quality of jobs, as withholding taxes roll over Year over year, it can only mean that the US is replacing high paying FIRE jobs with low paying construction and manufacturing. So much for the improvement.

@WARREN MOSLER, The participation rate keeps falling as people drop out of the labor force. Makes for nice stats if you don’t count the several million who dropped out and then count the nine million or so part time as employed. Statistics are just made for liars. Wonder how much GDP would be if everyone worked?